EU Response to the economic and financial crisis - November 2012

The economic crisis has prompted intense and sustained action by the EU's national governments, the European Central Bank and the Commission. All have been working closely together to support growth and employment, ensure financial stability, and put in place a better governance system for the future.

Key events

The Eurogroup concludes that the necessary elements are now in place for Member States to launch the relevant national procedures required for the approval of the next EFSF disbursement, which amounts to EUR 43.7 bn. EUR 10.6 bn for budgetary financing and EUR 23.8 bn in EFSF bonds earmarked for bank recapitalisation will be paid out in December. The disbursement of the remaining amount will be made in three sub-tranches during the first quarter of 2013, linked to the implementation of the MoU milestones (including the implementation of the agreed tax reform by January) to be agreed by the Troika.

On 28 November the Commission kicked off the second cycle of the Macroeconomic Imbalance Procedure with the publication of the Alert Mechanism Report (AMR). The report calls for in-depths reviews in 14 EU Member States.

At the beginning of this week a staff-level agreement was reached between the EU-IMF Troika and the Greek authorities on an updated set of programme conditionality.

The long meeting of the Eurogroup on Tuesday night saw substantial progress towards an agreement on Greece, even if a definitive conclusion ultimately proved elusive.

Importantly, the Eurogroup recognised that the Greek authorities have successfully implemented the full set of prior actions agreed with the Troika. This is the result of a very considerable effort on their part. On the fiscal side, these include the adoption of measures totalling some €13.5 billion or 7% of GDP.

The Eurogroup welcomed the staff-level agreement reached between the Troika and the Greek authorities on updated programme conditionality, including a wide range of far reaching measures in the areas of fiscal consolidation, structural reforms, privatisation and financial sector stabilisation.

Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) visited Lisbon during November 12 - 19 for the sixth quarterly review of Portugal’s economic programme. The teams concluded that the programme remains broadly on track.

Speaking about the review, Commission Vice-President Rehn said: "the reforms underway are laying the ground for sustainable growth and job creation and the Commission will continue to stand by Portugal as it sees these reforms through." More...

Mr Rehn said: "Today's political agreement removes the uncertainty that has been hanging over Greece for too long, holding back confidence, investment and growth. For the eurozone this was a real test of our credibility, of our ability to take decisions on the most challenging of issues. And it was a test that we could simply not afford to fail."

The Eurogroup concluded that "the revised fiscal targets, as requested by theGreek government and supported by the Troika, would be an appropriate adjustment for the further path of fiscal consolidation in view o f recent economic developments."

Praising the progress made in fiscal and structural reforms, Mr Rehn said that 'it is right and necessary to recognise how far Greece has come in terms of fiscal reforms, and in the most of trying of circumstances for the Greek people.

The European Bank Coordination (“Vienna”) Initiative held its fifth Full Forum Meeting in Brussels on 9 November, 2012. Vice-President Rehn said: “We are turning the lessons we have learnt from the crisis into practical solutions. The necessary measures, in the area of bank recovery and crisis management and the banking union, impact the relations between home and host country authorities. This is where the Vienna Initiative provides support – by offering a coordination platform and strengthening the voice of host countries."

European Commission Vice President Olli Rehn said: "We are providing solutions to support long-term investment and to put the EU back on the road to sustainable growth. The project bond initiative is a key element in the Compact for Growth. It is an innovative means of unlocking private investment in infrastructure, enhancing competitiveness and helping to boost growth and job creation. Every euro channelled from the EU budget into the Project Bond Initiative could generate about 20 euros of infrastructure investment, underlining the role of the EU budget as an engine for growth. I am looking forward to the first projects and count on active participation by the stakeholders.”

Teams from the International Monetary Fund (IMF) and the European Commission (EC) visited Bucharest during November 6–14 to have technical discussions on the macro economic outlook and progress made towards achieving the 2012 fiscal targets and implementing structural reforms, as well as to discuss the broad outline of the 2013 budget.

The short-term outlook for the EU economy remains fragile, but a gradual return to GDP growth is projected for 2013, with further strengthening in 2014.

On an annual basis, GDP is set to contract by 0.3% in the EU and 0.4% in the euro area in 2012. GDP growth for 2013 is projected at 0.4% in the EU and 0.1% in the euro area. Unemployment in the EU is expected to remain very high.

The Annual Growth Survey for 2013 launches the 2013 European semester for economic policy coordination, which ensures Member States align their budgetary and economic policies with the Stability and Growth Pact and the Europe 2020 strategy. It is the basis for building a common understanding about the priorities for action at the national and EU level as the EU seeks to return to a path of sustainable growth and job creation.